Global outsourcing firms cast gaze on U.S. state and local market

A global leader of consulting, technology and outsourcing announced yesterday strategic expansions of its internal and external leadership teams to strengthen its U.S. public sector capabilities.

Capgemini Government Solutions LLC, a wholly owned subsidiary of France-based Capgemini said new leadership appointments will help the company “become a better partner of choice for federal, state and local agencies.” Capgemini is a $13 billion organization with 90,000 employees worldwide, with a history in European public sector projects.

“Today’s government agencies are seeking a new approach for management and technology initiatives that will help them address the increased demands and accountabilities they face,” Joe Moye, vice president of Capgemini U.S. Public Sector, said in a statement.

But Capgemini is hardly the only new entrant to the U.S. state and local arena from beyond our shores. Indian outsourcers Wipro, Infosys and HCL Technologies have been on the hunt for state contracts for the past several months, as their traditional revenue lines began to dry. According to the India-based Economic Times, Indian software and service providers, “are laying foundation for the next round of multi-million dollar orders from the big US corporations, by pitching for low-value, but politically important US state governments’ orders.”

The global government IT outsourcing market is said to be around $100 billion, and the U.S. state government portion is estimated to be 5-6 billion this year. States such as Virginia, Arizona and Missouri were named as possible targets for the Indian-outsourcers, who already partner with JPMorgan Chase and Morgan Stanley in ways that cross with state health departments.

“The marketing muscle that comes from such contracts is huge and working with the US state governments send out a signal of importance to other customers,” Siddharth Pai, managing director of outsourcing advisory firm TPI’s India unit., told the Economic Times. “For the Indian IT companies this is not a core business, but it creates a halo effect.”

As for Capgemini, their new leadership appointments suggest the company is looking to tap more than the traditional outsourcing market in the US. The company’s new vice president for state and local business, and senior manager for tax and revenue will join four new board members from a variety of public and private-sector backgrounds. Former officials for the Social Security Administration and Dept. of Defense’s Military Health System will work with a former Oracle executive and VP of Agilex in addressing issues facing municipal governments across the country.

“With the appointment of the Government Solutions board of directors and additional internal leadership team members, Capgemini is expanding its ability to assist government agencies collaborate, innovate and transform their operations,” Mr. Moye said.